Page 394 - SAIT Compendium 2016 Volume1

Eighth Schedule INCOME TAX ACT 58 OF 1962 Eighth Schedule
(b) the weighted average base cost, thereafter, of identical assets must be calculated by—
(i) adding expenditure allowable in terms of paragraph 20 in respect of identical assets to the base cost of identical
assets acquired and not disposed of before that expenditure was incurred; and
(ii) dividing that amount by the number of identical assets acquired and not disposed of after that expenditure was
incurred. (5) . . .
[Sub-para. (4) substituted by s. 84 (1) (d) of Act 60 of 2001.]
[Sub-para. (5) deleted by s. 84 (1) (e) of Act 60 of 2001.]
(6) Once a person has adopted one of the methods speci ed in this paragraph in respect of a class of identical assets
contemplated in subparagraph (3A), that method must be used until all those identical assets have been disposed of.
[Sub-para. (6) substituted by s. 84 (1) (f) of Act 60 of 2001.]
33 Part-disposals
(1) Subject to subparagraphs (2), (3), (4) and (5), where part of an asset is disposed of—
(a) the proportion of the expenditure attributable to the part disposed of is an amount which bears to the expenditure allowable in terms of paragraph 20 in respect of the entire asset the same proportion as the market value of the part
disposed of bears to the market value of the entire asset immediately prior to that disposal; and
(b) the market value on valuation date attributable to the part disposed of is an amount which bears to the market value adopted or determined in terms of paragraph 29 (4) in respect of the entire asset the same proportion as the market
value of the part disposed of bears to the market value of the entire asset immediately prior to that disposal.
(2) Subject to subparagraph (4), where a part of the expenditure allowable in terms of paragraph 20 or the market value adopted or determined in terms of paragraph 29 (4) in respect of an asset can be directly attributed to the part of the asset that is disposed of or retained then the apportionment contemplated in subparagraph (1) does not apply in respect of that
part of that expenditure or market value as the case may be.
(3) For the purposes of subparagraph (1) and (2) there is no part-disposal of an asset by a person in respect of—
(a) the granting of an option by that person in respect of an asset;
(b) the granting, variation or cession of a right of use or occupation of that asset by that person in respect of which no
proceeds are received by or accrue to that person;
(c) the improvement or enhancement of immovable property which that person leases from a lessor; or
[Item (c) deleted by s. 61 (1) (b) of Act 32 of 2004 and inserted by s. 71 (1) (b) of Act 31 of 2005.] (d) the replacement of part of that asset in repairing that asset.
(4) Where proceeds are received by or accrue to a person in respect of the granting, variation or cession of a right of use or occupation of an asset by that person, the portion of the expenditure allowable in terms of paragraph 20 or market value adopted or determined in terms of paragraph 29 (4) attributable to the part of the asset in respect of which those proceeds were received or accrued is an amount which bears to that expenditure or market value as the case may be of the entire asset the same proportion as those proceeds bear to the market value of the entire asset immediately prior to that disposal.
(5) Where a person has adopted the 20 per cent of proceeds method contemplated in paragraph 26 (1) (b) in determining the valuation date value of a part of an asset that has been disposed of, that person must adopt that method in determining the valuation date value of any remaining part of that asset.
[Para. 33 substituted by s. 80 of Act 74 of 2002 and by s. 99 of Act 45 of 2003.]
34 Debt substitution
Where a person reduces or discharges a debt owed by that person to a creditor by disposing of an asset to that creditor, that asset must be treated as having been acquired by the creditor at a cost equal to the market value of that asset at the time of that disposal, which cost must be treated as an amount of expenditure actually incurred and paid for the purposes of paragraph 20 (1) (a).
35 Proceeds from disposal
[Para. 34 substituted by s. 85 (1) of Act 60 of 2001.]
PART VI PROCEEDS (paras. 35–43)
(1) Subject to subparagraphs (2), (3), and (4), the proceeds from the disposal of an asset by a person are equal to the amount received by or accrued to, or which is treated as having been received by, or accrued to or in favour of, that person in respect of that disposal, and includes—
(a) the amount by which any debt owed by that person has been reduced or discharged; and
(b) any amount received by or accrued to a lessee from the lessor of property for improvements effected to that property. [Sub-para. (1) amended by s. 86 (1) of Act 60 of 2001.]
(1A) The amount of proceeds from the disposal of a share, option or certi cate issued to any person by a resident company in exchange, directly or indirectly, for shares in a foreign company as contemplated in paragraph 11 (2) (b) must be treated as an amount equal to the fair market value of the shares in the foreign company.
[Sub-para. (1A) inserted by s. 133 (1) of Act 31 of 2013 – date of commencement: 1 January 2014; the substituted wording applies iro shares issued on or after that date.]
(2) The amount of the proceeds from a disposal by way of a value shifting arrangement is determined as the market value of the person’s interests to which subparagraph 11 (1) (g) applies immediately prior to the disposal less the market value of the person’s interests immediately after the disposal, which amount shall be treated as having been received or accrued to that person.
386 SAIT CompendIum oF TAx LegISLATIon VoLume 1